This myth, Bartik writes, is based on a “profound misunderstanding” of how the economy works. That it’s commonly held by policymakers contributes to misguided economic policies that fail to take into account the important role that government investments and services play in the economy.

But a more perceptive analysis recognizes that all sectors of the economy ideally can provide productive goods and services that can help contribute to greater well-being. Our economy is interdependent. The value of what we produce, and the number and quality of jobs, can be affected by all sectors of the economy… This includes the government.

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But more importantly, if government provides productive services, it helps support the private economy. These supports include a legal system of property rights, a criminal justice system that preserves public order, roads and other transportation infrastructure that facilitate commerce, and human capital development programs that develop the skills of the labor force. Read More

The tide of anti-tax sentiment may finally be ebbing here in North Carolina.

Voters in six North Carolina counties went to the polls this year to vote on increasing the local sales tax rate to support public investments in education, economic development, and transit. In all six cases, voters approved adding a quarter-cent or more to the local sales tax rate.

Last night, voters in four North Carolina counties – Buncombe, Durham, Montgomery, and Orange — approved raising the local sales tax rate. Those approvals come on the heels of two successful sales tax referenda in Cabarrus and Halifax counties earlier this year.

These results contrast sharply with similar referenda in recent years. Last year, amidst the rise of the anti-tax Tea Party, voters in 16 North Carolina counties rejected increasing the local sales tax to fund public investments. Only in seven counties did voters approve adding a quarter-cent to the local sales tax, and none of those approvals came during the November election. Read More

A new report from the NC Budget and Tax Center finds that state and local taxes, by funding proven public investments and services, can be important tools for creating jobs both now and in the long term.

The evidence from credible economic research demonstrates that using state and local tax dollars for public investments in education, transportation, public safety, and health helps to create jobs and increase household income by reducing business costs and increasing worker productivity.

In the short term, especially in times such as now when such a large share of adults are out of work, mainstream economic theory and industry-standard economic modeling indicate that tax-financed services and investments often create jobs and spur economic growth: raising additional tax revenue is likely to put more money to work in a state’s economy. That’s because much of the additional tax revenue would otherwise have been saved or spent on imported goods and services that have little direct benefit for a local economy. Using additional tax revenue to hire teachers, first responders, nurses, and construction workers will put money directly to work back in the local economy.

In the long term, spending on upgrading and maintaining highways and railroads, educating children and training workers, and improving public health and safety makes the entire economy more productive. A recent survey of the literature by economist Jeffrey Thompson documented a considerable body of research showing that tax-financed investments in infrastructure, public education from preschool to higher education, and public health and safety can result in stronger local and regional economies. Read More

North Carolinians are still struggling to recover from the Great Recession, but a new report from the NC Budget & Tax Center shows that the recent federal debt deal threatens to make things worse by weakening efforts to improve education and worker retraining; cutting back on research for innovation and growth; allowing our roads, bridges, and schools to continue deteriorating; and reducing access to health services.

To make matters worse, the deal ignored the country’s highest priority by neglecting to include any efforts to put people back to work, even at a time when interest rates are so low that investors will actually pay the federal government to hold onto their money.

The first round of $750 billion in cuts will fall hard on North Carolina’s public schools, economy, and military communities. Roughly half of these cuts will hit federal domestic investment spending, one-third of which flows through state governments into local communities to support public schools, workforce development, law enforcement, health and human services, and infrastructure. The other half (at least for the first two years) will hit spending on national security, mostly the military, which is a critical part of many North Carolina communities and their local economies. Read More